Foreign portfolio investors (FPIs) sold the most in the Indian information technology (IT) sector during the month of May, a report by Business Standard stated. Overseas investors sold shares worth $5.15 billion in May, out of this, outflows worth $2 billion was seen in the IT space, added the report.
"After IT, banking & financial services and fast-moving consumer goods (FMCG) saw the biggest outflows — at $1.55 billion and $660 million — respectively. Oil and gas stocks saw selling worth $460 million," it further informed.
Banking & financial services and technology sectors have been seeing heavy selling for some time now. In the last six months, the BFSI sector saw selling worth $10.34 billion, while the IT space saw selling worth $7.13 billion, BS highlighted.
"The IT sector has now seen FPI selling for nine straight months. FPI allocation in IT dipped to 12.7 percent, against 15.4 percent in December last year. The FPI allocation in IT now is, in fact, the second-lowest since June-2020, at 12 percent," it added.
Analysts told the market daily that the selling in IT stocks is a 'ripple effect' of the fall in stock prices of US tech majors. However, they also noted that there is no reason to panic about Indian IT stocks because of the weakness in their US counterparts and Nasdaq.
"Business profiles of technology stocks in the US and India are quite different. Secondly, the domestic IT companies benefit from rupee depreciation while US technology stocks are the losers of a significant rise in the dollar exchange rate. Nasdaq now trades around 40 P/E on current trail in earnings, while in India, out of the top-5 IT companies, four trade in the range of 18 to 29 times, and the largest player trades at 33 times on FY2022 (financial year 2021-22) EPS (earnings per share) basis. Thus, there is a lot of comfort in the domestic IT stocks,” said G.Chokkalingam, founder, Equinomics told BS.
On the positive side, the report stated that the logistics stocks saw inflows worth $340 million. This was largely on account of Delhivery’s ₹5,235-crore initial public offering (IPO), the second-largest of the year after Life Insurance Corporation (LIC).
FPI allocation in the logistics sector — at 1.6 percent — has reached its peak since September 2019 while FPI allocation in auto stocks saw a rise at 5.2 percent in May against 4.7 percent in April 2022, informed BS.
Power stocks also saw buying worth $290 million in May. In the last three months, the power sector has continued to attract foreign investments worth $410 million, as per BS. On the other hand, FPIs sold shares worth $350 million in metals in May after four months of successive buying, it noted.
Further, FPI allocation in real estate, which had reached a high of 1.40 percent in November 2021, now stands at 1.20 percent while cyclical stocks which used to see FPI buying interest in the past, have seen their allocation dip to 8 percent in May from 9.3 percent in February this year, noted BS.
FPIs have been on a selling spree since October last year. Tightening of Policy by the Federal Reserve, supply disruptions caused by the Russia-Ukraine war and lockdowns in China that threaten to keep prices of key commodities high are some main reasons of the massive selling in May.